By: Kenneth Brown Michael Forney Michelle Kordahi James O’Malley
Company History: Subway prides itself in being a healthy fast food chain offering a variety of sandwiches and subs Founded in the summer of 1965, by Fred DeLuca and investor Dr. Buck Deluca was trying to make some money for college As a growth strategy, and in an effort to increase profits, they embarked on the idea of franchising their business Subway locations grew exponentially
Subway prides itself in being a healthy fast food chain offering a variety of sandwiches and subs
Founded in the summer of 1965, by Fred DeLuca and investor Dr. Buck
Deluca was trying to make some money for college
As a growth strategy, and in an effort to increase profits, they embarked on the idea of franchising their business
Subway locations grew exponentially
Strategy: Formulating a unique value proposition Targeting an underserved customer segment Structuring an aggressive franchising model Expanding internationally
Formulating a unique value proposition
Targeting an underserved customer segment
Structuring an aggressive franchising model
Expanding internationally
“ Eat Fresh” Slogan Higher perceived value against competition Custom sandwiches tailored to customer Appeal to young professionals Marketing :
“ Eat Fresh”
Slogan
Higher perceived value against competition
Custom sandwiches tailored to customer
Appeal to young professionals
Franchising: Low start up costs Less equipment is needed Countertop, oven, refrigerator, and microwave Small Area is needed Real-estate costs are low Lowered operating costs which therefore raise margins $12,000 vs $45,000 for McDonalds Makes it appealing to investors
Low start up costs
Less equipment is needed
Countertop, oven, refrigerator, and microwave
Small Area is needed
Real-estate costs are low
Lowered operating costs which therefore raise margins
$12,000 vs $45,000 for McDonalds
Makes it appealing to investors
International Growth: 1 st entered into world market in 1984 in the Middle East nation of Bahrain International expansion approach at the time was… “ If you like Subway, you think it’s a good thing, and you think it would work in your country, then we’ll teach you the concept and how it works and you go make it work in your country.” Used development agents to recruit franchises and assist in growth Core menu was left unchanged, with exception of religious and cultural consideration They believe the sandwiches will catch on and overcome cultural barriers
1 st entered into world market in 1984 in the Middle East nation of Bahrain
International expansion approach at the time was…
“ If you like Subway, you think it’s a good thing, and you think it would work in your country, then we’ll teach you the concept and how it works and you go make it work in your country.”
Used development agents to recruit franchises and assist in growth
Core menu was left unchanged, with exception of religious and cultural consideration
They believe the sandwiches will catch on and overcome cultural barriers
“ In summary, Subway’s success consisted of a strong brand based on a unique value proposition aimed at a dissatisfied target segment. The company’s low-cost franchising strategy has allowed Subway to flourish both domestically and overseas.”
“ In summary, Subway’s success consisted of a strong brand based on a unique value proposition aimed at a dissatisfied target segment. The company’s low-cost franchising strategy has allowed Subway to flourish both domestically and overseas.”
How important is Asia for Subway? In Asia there are various cultures, religions and languages This allows for a diverse, flexible, and innovative market Discretionary income is rising Major opportunity for fast-food in the growing middle class Allows Subway to zone in on market niche
In Asia there are various cultures, religions and languages
This allows for a diverse, flexible, and innovative market
Discretionary income is rising
Major opportunity for fast-food in the growing middle class
Allows Subway to zone in on market niche
Market Opportunity Facts: The Asia-Pacific fast food market has experienced 11.7 percent growth between 1999 and 2003. The market was worth $77.9 billion in 2003, an increase of 55.8 percent since 1999. This growth is considerably stronger than the overall global market and is driven by the large-scale expansion of the Chinese market 83 % In terms of value, Asia-Pacific represented 28.3 % of the global market in revenues for fast food in 2003.
The Asia-Pacific fast food market has experienced 11.7 percent growth between 1999 and 2003.
The market was worth $77.9 billion in 2003, an increase of 55.8 percent since 1999.
This growth is considerably stronger than the overall global market and is driven by the large-scale expansion of the Chinese market 83 %
In terms of value, Asia-Pacific represented 28.3 % of the global market in revenues for fast food in 2003.
Competitors: McDonalds KFC Burger King Hardee’s Wendy’s Popeye’s
McDonalds
KFC
Burger King
Hardee’s
Wendy’s
Popeye’s
Major Drivers of Global Fast Food Market Growth Traditional : Convenience, price, and value. Also a place for youth to socialize. New Drivers : Nutritional value and diversity of options
Traditional : Convenience, price, and value. Also a place for youth to socialize.
New Drivers : Nutritional value and diversity of options
Issues and Concerns in the Global Fast Food Market Reputation as a decent place to eat Ethical consideration for local venues – fast food can put them out of business Many fast food places seen as American or Western icons – Can be dangerous in Middle East where protests and demonstrations are carried out at places like McDonalds
Reputation as a decent place to eat
Ethical consideration for local venues – fast food can put them out of business
Many fast food places seen as American or Western icons – Can be dangerous in Middle East where protests and demonstrations are carried out at places like McDonalds
Impact of Global Drivers and Concerns on the Fast Food market in Asia All of the global concerns are particularly present in Asia Largely stratified social class makes location choice difficult Many Asians eat with gloves or don’t eat part of food they touch Majority of Asian population (83%) lives in rural areas and do not have convenient access to fast food venues
All of the global concerns are particularly present in Asia
Largely stratified social class makes location choice difficult
Many Asians eat with gloves or don’t eat part of food they touch
Majority of Asian population (83%) lives in rural areas and do not have convenient access to fast food venues
Specific Regional Drivers and Concerns Main drivers in Asia : Type of cuisine, price, convenient location, good hygiene standards, and health. Concerns in Asia : Hygiene and nutrition are two of the largest concerns in Asia Massive social stratification means many cannot afford even fast food In some poor areas, family-owned restaurants are the only way people can make a living
Main drivers in Asia : Type of cuisine, price, convenient location, good hygiene standards, and health.
Concerns in Asia : Hygiene and nutrition are two of the largest concerns in Asia
Massive social stratification means many cannot afford even fast food
In some poor areas, family-owned restaurants are the only way people can make a living
Market Trends and Consumption Behavior Towards Fast Food in Asia Reception to fast food is large in many developed Asian economies and growing in others Trends favor places that offer a “whole package” which includes all of the regional drivers (Type of cuisine, price, convenient location, good hygiene standards, and health) Obesity in Asia is causing a push toward healthy low-calorie, low-fat alternatives to typical fast food (burgers) Eating at Western style places perceived as high class Fast food venues provide a place for many people to conveniently sit down and eat together. Eating together is very popular in Asia.
Reception to fast food is large in many developed Asian economies and growing in others
Trends favor places that offer a “whole package” which includes all of the regional drivers (Type of cuisine, price, convenient location, good hygiene standards, and health)
Obesity in Asia is causing a push toward healthy low-calorie, low-fat alternatives to typical fast food (burgers)
Eating at Western style places perceived as high class
Fast food venues provide a place for many people to conveniently sit down and eat together. Eating together is very popular in Asia.
Asia Important as a Market of Interest for Fast Food Yes, absolutely The Asian-Pacific region represented 28.3% of global revenue for fast food industry
Yes, absolutely
The Asian-Pacific region represented 28.3% of global revenue for fast food industry
Market Opportunities in Asia
Questions? What countries do you believe to be the best opportunity for Subway? In terms of demographics who do you believe Subway should target?
What countries do you believe to be the best opportunity for Subway?
In terms of demographics who do you believe Subway should target?
Best Countries in Particular in Asia China, India, and South Korea Each country is not yet a large consumer of fast food Subway can still capitalize on first mover approach in these areas as economic growth is starting to become rapid In the coming years, many people will be able to access and afford fast food in these currently lagging countries.
China, India, and South Korea
Each country is not yet a large consumer of fast food
Subway can still capitalize on first mover approach in these areas as economic growth is starting to become rapid
In the coming years, many people will be able to access and afford fast food in these currently lagging countries.
CHINA Third largest economy at $10 trillion dollars 97 % of the population eat at fast food restaurants The demand for fast food increases with the economy, more disposable income Drive-thru’s are increasingly popular, as well as eat-in restaurants Chinese people don’t like to eat with their hands; introduce a subway salad bread bowl
CHINA
Third largest economy at $10 trillion dollars
97 % of the population eat at fast food restaurants
The demand for fast food increases with the economy, more disposable income
Drive-thru’s are increasingly popular, as well as eat-in restaurants
Chinese people don’t like to eat with their hands; introduce a subway salad bread bowl
INDIA Exponentially increasing middle class Fast food market growing between 15 and 20% annually Indian food is very specific, needs adaptation between chicken, lamb, and fish Very high competition, but no real competitors in terms of sandwiches
INDIA
Exponentially increasing middle class
Fast food market growing between 15 and 20% annually
Indian food is very specific, needs adaptation between chicken, lamb, and fish
Very high competition, but no real competitors in terms of sandwiches
KOREA Fast Food market is growing 30% annually Increasing demand for healthy options Sandwich sales doubled in 2003 Young professionals and students are interested in healthy options and low calories
KOREA
Fast Food market is growing 30% annually
Increasing demand for healthy options
Sandwich sales doubled in 2003
Young professionals and students are interested in healthy options and low calories
Recommendations: Take advice from franchisees Continue healthy eating strategy Tailor menu to different national markets (localize) Offer new items for local tastes
Take advice from franchisees
Continue healthy eating strategy
Tailor menu to different national markets (localize)
Offer new items for local tastes
Recommendations: Increase seating to be in line with Asian culture Add breakfast items Promote as customizable, healthy sandwich Stick with core competencies for now Price according to country’s discretionary income
Increase seating to be in line with Asian culture
Add breakfast items
Promote as customizable, healthy sandwich
Stick with core competencies for now
Price according to country’s discretionary income
Additional Questions?
Additional Questions?
Thank you! The End…
Thank you!
The End…
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